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Emerging Market Credit Daily Roundup

Saudi Arabia to resume domestic debt sale – Al Baraka Banking Group mulls dollar sukuk – independent observers dispute Turkey referendum result – Zambia looks to clinch IMF deal – South Africa FinMin tries to ease concerns over policy reversal – Kenya could scrap interest rate cap – Odebrecht Ambiental readies local debt sale – Peru mulls bond issuance – ISA prices COP700bn triple-tranche issuance – Moody’s: Chinese banks’ balance sheets under stress – Industrial Metallurgical Holding to hit the market

Apr 19, 2017 // 5:05PM


Middle East & Turkey

Saudi Arabia is likely to resume domestic government debt issues within a couple of months, Finance Minister Mohammed al-Jadaan told Reuters. The kingdom stopped monthly sales of local-currency conventional bonds in October, partly to curb upward pressure on market interest rates as money-market liquidity tightened.  Jadaan did not specify if the new domestic debt issues would be in the form of conventional or Islamic bonds.

Qatar is planning to stay out of the international capital markets this year, according to a report in Reuters, as a rebound in oil prices eases pressures on the sovereign's finances.

Bahrain's Al Baraka Banking Group, a sharia-compliant lender, plans to issue US dollar-denominated sukuk sometime within the next three months. The Tier 1 issue may be split into multiple tranches and is likely to be of benchmark size, with Standard Chartered acting as lead adviser.

Independent observers from the Organisation for Security and Cooperation in Europe (OSCE) saw up to 2.5 million votes in Turkey's recent referendum granting President Tayyip Erdogan stronger executive powers could have been manipulated. Erdogan has dismissed the claims, and the OSCE has confirmed that the Turkish government is refusing to cooperate with any potential investigation into the anomalies and potential vote manipulation. The 'yes' side won Sunday's referendum with 51.4% of the vote, or 1.25 million more votes than the 'no' camp.



The Kenyan government is mulling whether to remove a controversial interest rate cap many of the country's banks say puts their balance sheets under unnecessary strain. A source speaking with Bonds & Loans said the country's Central Bank is likely to wait until after the forthcoming elections in August before making a decision, but is "seriously considering the move."

Zambia is looking to clinch a US$1.6bn IMF programme this summer after nearly three years of discussions. The country's debt levels have been climbing steadily over the past couple of years, and according to data from Bloomberg have doubled since 2012. Sources speaking with Bonds & Loans suggest the move could pave the way for further funding deals with other large multilateral lenders and DFIs. The African sovereign last hit the bond market in 2015 when it sold US$1.25bn in bonds.

Nigeria has secured last week a US$150mn loan from the World Bank for its mining sector. The loan which is provided in the framework of the Mineral Sector Support for Economic Diversification (MinDiver) project aims to boost the mining industry, by developing infrastructure, knowledge and attracting investment in the sector.

Nigeria's central bank announced that it had offered US$100mn in currency forwards at an auction to boost liquidity on the interbank market and support the naira. The dollar sale, for which settlement will be between one week and 45 days, is aimed at meeting demand from businesses, the bank said in a statement. The Central Bank will offer an extra US$80mn for travel, medical services and tuition and US$100mn to small and medium enterprises.

South Africa's new Finance Minister Malusi Gigaba denied any radical policy change saying the economic blueprints of the ruling African National Congress (ANC) did not entail wholesale nationalisation of mines and banks. This comes after an advisor of the Finance Minister, Christopher Malikane, advocated for the nationalisation of those industries in an opinion piece published by local media.

Tunisia's Central Bank will reduce its interventions in a bid to slowly allow the dinar to weaken, the Finance Minister said this week. The strategy, part of its bid to unlock fresh funding from the IMF, will see the Central Bank step in if the value of the dinar weakens too rapidly - but the MinFin stopped short of stating a specific threshold whereby the Bank would step in to prop up the currency.

Morocco plans to returns to the local sukuk markets before summer but has no immediate prospects for an international sukuk bond sale, the finance minister told Reuters.



Odebrecht Ambiental, a waste and water treatment division of the embattled construction firm, is looking to sell fresh local debt this month, according to a regulatory filing. The company is looking to raise up to BRL50mn in the local capital markets. The deal is being led by XP Investimentos.

Petroleum distributor Ipiranga Produtos de Petróleo S.A. is in the process of readying a BRL750mn (approx. US$241mn) agriproduct securitisation. The issuance will be split into notes maturing April 2022 and 2024. The sale is being coordinated by Bradesco, Itau BBA, BB Investimentos, and Santander, with the CRA structuring handled by EcoAgro.

A number of lawmakers representing Brazil's state of Minas Gerais are reportedly helping Cia Energética de Minas Gerais SA (Cemig) lobby for the renewal of hydroelectric dam licensing rights renewals, Reuters reported. Analysts believe the company's ability to retain rights to the dam is essential for ensuring its ability to repay its debt, which has trippled over the past five years.

The Brazilian president made new concessions on pension reform this week including setting a lower retirement ages for women, police, teachers and rural workers in a bid to help push the law through congress. Pension reform is one of the many social security measures being targeted by the current administration in a bid to trim the deficit.

Tereos Açúcar & Energia Brasil, one of the largest sugar producers in the world, is prepping a BRL300mn (approx. US$96mn) CRA. The CRA, which is being structured by Vert, will mature in 2020. The deal is being coordinated by Citi, Itau BBA, and XP Investimentos.

Venezuela is bracing for "the mother of all marches" as groups both for and against socialist President Nicolas Maduro, are set to take the streets of Caracas. Wednesday is supposed the biggest day of protests since Maduro’s allies moved to strip the power of the opposition-majority legislature and banned opposition leader Henrique Capriles from politics. Maduro’s attempts to tighten his grip on power have triggered deadly social unrest and escalated the country’s political and economic crisis.

Argentina's reforms will generate an estimated US$14bn of foreign investment in Argentina, according to the head of the government's Investment and Trade Promotion body Juan Procaccini. In an interview with Reuters this week Procaccini said the body is working with a range of private sector firms to generate an estimated US$12.5bn in additional investment into projects in the country.

Peru is still mulling a potential issuance of up to US$3bn in fresh bonds sometime in the first half of this year. The sovereign has been mulling an issuance for months, with proceeds from the bond sale being earmarked to help finance modernisation efforts at Petroperu, the state-owned oil company.

Ecuador is in the market for fresh bonds this month, the fifth time in a year that the South American sovereign plans to tap the market. The sovereign started a week-long roadshow in the US this week and plans to move on to Europe next week. The sovereign needs to raise about US$3.75bn to help finance about US$10.3bn in budget spending in 2017, according to Fitch.

Colombian transmission infrastructure giant ISA successfully placed COP700bn in bonds maturing in 7, 15 and 20 years. The company placed COP260.8bn in 7-year notes at 6.75%, COP196bn in 15-year notes at IPC+3.81%, and COP243bn in 25-year notes at IPC+4.00%.  ISA says the issuance was oversubscribed by 2.7x. BTG Pactual S.A., Credicorp Capital Colombia S.A. and Valores Bancolombia S.A. were leads on the deal.



Asian agribusiness Wilmar International hit the yen markets with week, placing a JPY10bn bond maturing 2022. The notes were priced at par to yield 0.5833%. DBS Bank was the sole bookrunner on the trade.                            

Malaysia's national mortgage corporation Cagamas Berhad placed US$350mn in fresh bonds this week. The notes maturing 2020 were priced at par and carry a 2.53% coupon. HSBC, Maybank, and Standard Chartered Bank led the sale.

India's capital markets regulator Sebi is moving forward with plans to introduce a framework that would allow issuers to consolidate their debt securities. The move is expected to ensure better price discovery for investors and relieve amortisation management headaches for issuers.

India's IndusInd Bank has approved a new resolution to raise up to Rs1,000 crore (approx. US$153mn) through the sale of Tier I Basel III-compliant notes through a private placement. The move comes just one month after the bank hit the market with a similar placement of Tier I instruments.

Sime Darby has launched an exchange tender this week, with the company looking to repurchase up to US$400mn of its 2018 notes and US$400mn of its 2023s. The company said in a statement that it is currently in the process of soliciting consent from existing bondholders to substitute obligors - from Sime Darby to Sime Darby Plantation Sdn Bhd

Chinese banks have seen increased profitability pressures due to slower growth in the country, a Moody's report warns. "Overall, the moderating nature of the economic growth weighed on corporate loan growth and profitability during 2016, but its impact on asset performance remained manageable, while the smaller banks saw pressure on their capitalization and funding profiles," said Yulia Wan, a Moody's Assistant Vice President and Analyst.

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